• Final FY2013 fully imputed dividend
of 7.2 cents per share in line with forecast

Mighty River Power has reported financial results
for the year to 30 June 2013, with EBITDAF, Net Profit,
Underlying Earnings and Operating Cash Flow above forecasts
(PFI) included in the Mighty River Power Share Offer
Investment Statement and Prospectus issued in April.

Mighty River Power Chair, Joan Withers, said
FY2013 was “an intensive year for our Company as we’ve
made the transition from SOE to listed company, grown market
share by adding value for our customers, and reported
operating performance and financial results above
forecasts.”

“We’ve delivered on all these fronts by
achieving growth in customer sales volumes, controlling
expenditure, and using the diversity and flexibility of our
generation and sales portfolio to offset the impact of a
Waikato drought.”

Mrs Withers said a key measure of
operating performance, Energy Margin, held up despite the
drought – highlighting once again the Company’s ability
to perform close to plan under low hydro inflows – a key
competitive strength for Mighty River Power in the New
Zealand market.

“Our FY2013 results highlight a
distinctive competitive advantage for Mighty River Power due
to the fact that even large reductions in Waikato hydro
generation volumes are small relative to overall national
supply, with little influence on national wholesale
electricity pricing. This means that even though hydro
volumes in the Waikato were well below average, more than
30% of our annual production is reliable geothermal
generation, and we could buy cheaply from the market to
cover our sales portfolio,” she said.

Operating Earnings
(EBITDAF) for the year were $8 million favourable to the PFI
forecast of $383 million, with NPAT (up 21%) and Underlying
Earnings (up 13%) both above forecasts in the Company’s
Investment Statement and Prospectus. Operating Expenditure
was below the IPO forecasts, reflecting a combination of
deferral of expenditure into later years and a focus on cost
management that lifted operating performance during the last
quarter of FY2013.

EBITDAF was down $71 million on the
previous year to $390 million (2012: $461 million), due
primarily to one-off costs related to international
geothermal and costs associated with the IPO. NPAT was up
$47 million on FY2012 to $115 million and Underlying
Earnings were up $17 million to $180 million.

Mrs Withers
said Mighty River Power’s Board has declared a fully
imputed final dividend of 7.2 cents per share (cps) in line
with forecast: “We are pleased to be making our first
dividend payment to our more than 100,000 shareholders as a
listed company, which will be paid on 30 September to
shareholders who are on our share register at 5pm on the
record date of 11 September 2013,” she said. “This
brings total dividends declared in FY2013 to $168 million
(or 12cps), a 40% increase year-on-year.”

“We have
achieved the significant and strategic milestones we set for
ourselves in FY2013: a sharemarket listing of Mighty River
Power; completion of a major geothermal project, below PFI
budget and with a higher output than planned; and we’ve
taken direct control of our geothermal interests in Chile
and the US. These were all important steps forward for our
business.”

Mrs Withers said the Company had also
focused on improving customer satisfaction and loyalty,
using the improved information now widely available from AMI
technology to deliver “new innovative solutions and tools
such as GEM (Good Energy Monitor) which gives Mercury Energy
customers a new level of visibility so that they can take
more control of their energy consumption and
cost”.

Financial and business overview

Chief Executive, Doug Heffernan, said the
primary differences from the previous year (as forecast in
the PFI) were lower hydro volumes due to the drought, and
one-off costs associated with taking direct control of
International Geothermal interests and the IPO.

Dr
Heffernan said the Company’s 5% growth in electricity
sales to customers in FY2013 showed the success from
securing a 12% increase in commercial volumes ahead of our
new 82MW Ngatamariki geothermal station coming online. There
was a small drop-off in residential demand – consistent
with the national picture.

Mighty River Power’s total
generation reduced 9% to 6,462GWh (FY2012: 7,068GWh)
primarily due to the Company’s lower hydro volumes, down
350GWh (or 8%) as a result of weak inflows into the Waikato
catchments which were only 80% of average for the second
half of the year. Dr Heffernan said the Company achieved
“another excellent level of availability from our
base-load geothermal generation, of over 96%”. With the
lower wholesale prices, he said Mighty River Power also
reduced the use of its flexible gas-fired generation,
preferring to purchase lower-cost wholesale electricity to
manage its customer sales requirements.

With the
completion of the new Ngatamariki station, he said the
Company now had 40% of its production coming from low
operating cost base-load renewable geothermal which “gives
us additional strength and resilience in our core
business”. The Ngatamariki station – the largest project
of its type in the world – is in a four-week reliability
run, and on-track to be officially handed over later this
week.

Dr Heffernan said Mighty River Power would continue
to invest in technology to provide improved information for
customers – a key factor in driving customer satisfaction
and loyalty in an intensely competitive retail market. And,
with the low growth in electricity demand domestically, he
said the Company was utilising its rare geothermal
capability in higher-growth markets offshore – with a
similar focus to that which has proven successful
domestically: “We now have direct control and are applying
our successful New Zealand model, involving a very patient
and measured approach in line with commercial conditions.”

Outlook and priorities

Mrs Withers
said the Board and Management were “pleased to deliver
FY2013 results above IPO forecasts and we remain comfortable
with the Company’s PFI forecasts for FY2014 showing
significant growth in EBITDAF”. This forecast lift is
based on the additional earnings contribution from the new
Ngatamariki geothermal plant and the absence of one-off
costs seen in FY2013.

Mrs Withers said the Board had
forecast in the PFI an 8.3% increase in full year dividends
from 12cps to 13cps for FY2014, representing 71% of Free
Cash Flow. In maintaining an overview of capital management,
the Board would take into account the lower debt at year end
as a result of the operating out-performance and lower
capital expenditure relative to PFI, as well as the lower
capital expenditure now planned for FY2014, she said.

The
Company plans to issue updated earnings guidance on 7
November at the time of the Annual Shareholders’
Meeting.

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